Gifts in the Kuwait Civil Code: an overview
Dispute Resolution / Kuwait
Zakareya Al Othman Senior Associate,Dispute Resolution
In the realm of financial contracts, gift contracts hold a significant place, warranting comprehensive regulation in both form and substance by the Kuwait Civil Code. The legislator derived the substantive provisions regarding the gift from Islamic jurisprudence without adhering to the Fiqh provisions of a specific Madhab (Islamic school of thought). The gift contract, as integral component of the Kuwaiti legal framework, are transactions by which title is transferred without consideration. This distinct characteristic i.e. lack of consideration sets the gift contract apart from other contracts governed by the law. Gift contracts may often be thought of as irrelevant in the realm of commercial transactions, however they may have significant implications in commercial dealings. In this article, some aspects of gift contracts are tackled including its implications in commercial dealings.
The endowment has four components that can be summarized as follows i. a gift is a contract between living individuals, ii. the donor relinquishes their property, iii. it does not involve any form of remuneration and iv. it necessitates an intention to donate.
The legislator has emphasized that a gift must lack consideration, implying a loss on the donor's part and enrichment for the donee. Such enrichment stems mainly from the donor’s loss and it is not of consideration, is not devoid of reason. Concealing the gift is only permissible under specific circumstances, which allow for its revocation. Once these four essential components are met, and both parties freely and knowingly consent to the agreement, meeting all conditions for validity, the contract takes effect, generating all associated legal consequences.
Initially the legislator distinguished between gifts involving immovable and movable property in relation to the required formalities of concluding a gift contract. The former required official deeds, while the latter could be made through either official documents or receipt of the gift by the donee. Non-compliance with the required formalities under the law in this regard used to lead to invalidation.
But in a move to align with common practice and address potential shortcomings, the legislator now permits gift contracts to be concluded either by handing over the gift to the done or official documentation, regardless of the type of property involved which is also evidenced by the decisions of the Kuwaiti court of cassation (supreme court) in this regard.
Thus, upon fulfilling the requisite legal formalities for a gift contract, title of the donated assets is transferred from the donor to the donee, rendering the latter the owner of the property who may dispose thereof as he wishes.
While the default principle is that a gift is irrevocable once validly concluded, the legislator has delineated circumstances under which a donor may retract a gift. These cases include mutual consent and specific scenarios defined by law as follows.
Mutual Consent for Retraction: donors can withdraw gifts through mutual consent, regardless of whether an impediment of retraction exists or whether the donor has justifiable reason for the retraction or not as long as the donee agrees.
Judicial Authorization for Retraction: In the event that no mutual consent can be achieved for retraction, the donor can seek judicial authorization on basis of acceptable grounds or in the absence of impediments of retraction.
As such, certain gifts are binding as they can only be retracted by mutual consent. Unbinding gifts, on the other hand, require both an acceptable reason and judicial authorization for retraction. Examples of such gifts include those made for charitable purposes, gifts between spouses, or in cases of destruction of the gifted asset, or where the donee has disposed of the gifted asset.
The legislator has specified the acceptable grounds for retracting a gift, such as changes in the donor's social circumstances, donee misconduct, or the birth of a child.
Retracting a gift, whether by mutual consent or judicial authorization, renders the contract null and void. The donor is not obligated to deliver the gift, and if already handed over, the donor would be entitled to recover the gift. If the gifted property generates revenue, revenue of the gifted property can be retained by the donee until retraction of the gift takes place either by mutual agreement or by a court order, after which revenue must be returned to the donor.
An individual may deliberately dispose of money or assets, whether it is real estate or movable property, by giving a gift in an attempt to depreciate his pool of assets in order to defraud his creditors. Such practices can be invalidated by the court. As such, understanding the intricacies of gift contracts and their legal implications is crucial to safeguarding one's interests. It is advisable to exercise vigilance and seek legal advise before engaging in actions that may either endanger legal interests or that may later be invalidated by the court.
For further information,please contact Zakareya Al Othman.
Published in January 2024
